There are nonetheless loads of low-cost shares, even with the main indexes close to report highs.
Barron’s screened the S&P 500 index and recognized the 10 shares with the lowest price-to-earnings ratios utilizing 2022 revenue projections, based mostly on FactSet information.
The 10 least costly corporations embrace memory-chip makers
(ticker: MU) and
(WDC), chemical producer
(LYB), and life insurer
(LNC). Nine of the 10 have P/E ratios under six. Lyondell has the highest a number of in the group, at 6.5 instances estimated 2022 earnings.
The different six shares are drugmakers
(OGN); oil and fuel producers
(APA), previously Apache; dwelling builder
(PHM), and insurer
Several of the shares have had massive features over the previous 12 months, together with Diamondback, Micron, and Lincoln National, however all stay low-cost based mostly on earnings.
|Company / Ticker||Recent Price||Market Value (bil)||1-Yr Price Change||2022E* P/E Ratio|
|Viatris / VTRS||$14.82||$17.9||-10.8%||3.9|
|Unum Group / UNM||26.14||5.3||38.8||4.8|
|Diamondback Energy / FANG||69.80||12.6||56.8||5.2|
|Western Digital / WDC||61.07||18.7||73.0||5.5|
|APA / APA||16.68||6.3||4.3||5.6|
|PulteGroup / PHM||52.43||13.6||12.1||5.6|
|Organon / OGN||33.61||8.5||N/A||5.7|
|Lincoln National / LNC||66.87||12.5||79.6||5.8|
|Micron Technology / MU||70.60||79.5||59.6||5.9|
|LyondellBasell Industries / LYB||100.36||33.5||43.8||6.5|
*P/E ratio based mostly on calendar 2022 estimates; E=estimate; N/A=not relevant
Why are the shares so cheap?
Some like Viatris and Organon have ample, however manageable debt. Investors concern that income could also be peaking at corporations like Micron, Lyondell, and
These considerations may very well be creating alternatives for traders. Micron, whose shares commerce round $70, just lately initiated a small dividend ensuing in an 0.6% yield. J.P. Morgan analyst Harlan Sur wrote earlier this month that he anticipated Micron and its rivals to be “disciplined and prudent” about including provide in the face of sturdy demand. He has an Overweight score and a $140 value goal on the inventory.
Western Digital, at round $61, is a number one maker of flash reminiscence. Morgan Stanley analyst Joseph Moore is upbeat on its prospects, giving the inventory an Overweight score and a $88 value goal. He thinks the inventory is just too low-cost given that he expects earnings of $10 a share subsequent 12 months.
(MRK) spinoff that has a portfolio of off-patent medication and a girls’s well being enterprise, just lately reported better-than-expected earnings. It has set an $1.12 annual dividend, for a 3.3% yield at a current value of $33.50.
Joe Cornell, the writer of Spin-Off Research, has a Buy score and a $45 value goal on the inventory. Organon has a “peer-leading” yield, he just lately wrote, and potential “top-line growth and margin momentum over the medium-term.”
Viatris, a generic drugmaker spun off from
(PFE), has the lowest P/E in the S&P 500 at 3.9. Its shares just lately traded under $15.
J.P. Morgan analyst Chris Schott was inspired by the firm’s second-quarter earnings report, however maintained a Neutral score as he awaits extra proof of enhancing monetary efficiency after a troublesome 2020. The inventory has a 3% yield.
Energy shares have skilled a pointy pullback since June 1 due to a drop in oil costs and a sentiment shift away from the sector.
Diamondback Energy, a number one exploration and manufacturing firm in the Permian basin in Texas, has seen its shares drop to a current $70 from $100. The firm reported sturdy second-quarter outcomes and boosted its dividend by 12.5% to an annualized $1.80 a share. The inventory now yields about 2.6%.
Like many E&Ps, Diamondback has a excessive free-cash circulate yield. J.P. Morgan analyst Arun Jayaram is upbeat on Diamondback and just lately estimated its internet asset worth at $126 a share. APA produces oil and fuel in the U.S. and abroad and affords a play on a doubtlessly giant offshore oil area off Suriname in South America. Its shares commerce round $16.
Shares of PulteGroup, certainly one of the largest U.S. dwelling builders, have pulled again about 20% from a spring peak, to a current $52 amid considerations about demand and pricing energy.
Evercore ISI analyst Stephen Kim, certainly one of the most bullish Wall Street analysts on the sector, sees rising profitability for Pulte and friends. He has an Outperform score on Pulte and a $93 value goal. He sees about $Eight a share in earnings this 12 months and an above-consensus estimate of roughly $12 subsequent 12 months.
Lyondell, the world’s third-largest impartial chemical firm, is a serious participant in plastics. Its shares just lately traded round $100. Its CEO, Bob Patel, recently told Barron’s Jack Hough: “Whether we’re at peak, and is there a moderation or a hard reset—this is at the heart of the debate today with investors. I think there is strong demand in front of us.”
Lincoln National, which affords life insurance coverage, annuities, and different monetary merchandise, just lately traded round $67, lower than six instances projected 2022 earnings and under a conservative measure of e-book worth of $75. J.P. Morgan analyst Jimmy Bhullar likes Lincoln National, just lately citing an “improving business mix” and “discount valuation.” He has an Overweight score and a $81 value goal.
Unum, a supplier of life and incapacity insurance coverage, trades cheaply based mostly on earnings and e-book worth. That displays in half considerations about its long-term care insurance coverage reserves, which had been strengthened in 2020. The inventory, round $26, trades for about 5 instances projected 2022 earnings and for half of e-book worth.
Write to Andrew Bary at firstname.lastname@example.org